Via UBS’s excellent Jonathon Mott:
NAB announced on Thursday that it will take an additional $749m pre-tax charge for increased provisions related to its customer remediation program, 91% of which is wealth related and the remainder banking…Importantly, NAB is yet to provide for customer refunds related to aligned advisers. NAB has the highest number of aligned advisers across all the major banks at ~1,000 planners, and we believe there are material risks for significant provisions as the review progresses.
The additional remediation charges announced by NAB reduce CET1 by a further 13bp. We now estimate NAB’s 1H19 CET1 ratio at 10.61% as at 1H19, sitting only marginally above the 10.5% ‘unquestionably strong’ threshold. However, NAB’s capital position is expected to come under further pressure from additional remediation charges for aligned planners (likely in 2H19E) and it potentially faces ~NZ$5.9bn capital shortfall in New Zealand if the RBNZ’s proposals are adopted (announcement due in September).
Dividend now expected to be cut to 90cps per half, with risk of a cut to 85cps… we maintain our Sell rating.
